TD Bank profits now take a massive hit by money laundering fines, with its retail business falling 34% compared to last year.
On Thursday, TD Bank Group, the parent company of TD Bank, announced that profits from its U.S. retail business fell by 34% compared to last year as it begins to tackle serious regulatory problems.
The Toronto-based bank revealed that it did not meet its earnings growth, return on equity, or operating efficiency goals for the 2024 fiscal year.
As a result, the bank has decided to suspend these targets and does not expect to meet its previously announced goals for the upcoming fiscal year.
TD Bank stated that achieving earnings growth in the next year will be challenging.
Following this news, shares of TD Bank Group dropped nearly 6% on the New York Stock Exchange, hitting their lowest level in four years.
In October, TD Bank and U.S. regulators announced that the bank would face an asset cap—a serious penalty for major banking violations—due to years of failures in managing risks and preventing money laundering.
An asset cap restricts a bank’s ability to grow by limiting the loans and assets it can hold.
Big Crash! TD Bank Hit with $2.6 Billion Penalty, Impacting Bottom Line
The bank has already been fined about $3 billion by U.S. regulators for inadequate internal controls, which allowed criminals, including those involved in drug trafficking and terrorist financing, to exploit its systems.
“Our top priority is to fix these issues, and we are making significant progress,” said Bharat Masrani, the president and CEO of TD Bank Group.
Masrani is set to retire next April, and Raymond Chun, a long-time executive with the bank, will take over.
The bank indicated that fiscal 2025 will be a “transition year” focused on the necessary investments to meet regulatory obligations.
In its latest report, TD Bank noted that net income from its U.S. retail business dropped to 709 million Canadian dollars (about $505.5 million).
The bank expects that increased expenses related to risk and controls will impact earnings in 2025.
However, it remains optimistic about growth in its Canadian operations, which include personal and commercial banking, wealth management, and insurance.
The bank reported quarterly earnings of C$1.97 per share, which fell short of analysts’ expectations of C$2.41. Adjusted earnings per share were C$1.72, also below the forecast of C$1.82.
TD Bank is the second-largest bank in Canada and the tenth-largest in the U.S. by assets.
So far in 2024, TD’s shares listed in New York have dropped 17%, marking the worst year for the stock in nearly a decade, while the S&P 500 index has risen by 28%.
The bank’s shares listed on the Toronto Stock Exchange are down 12% this year.
Earlier this year, TD Bank was fined $3 billion for failing to monitor illegal cartel money and other criminal groups, WSJ confirmed.
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